1) If the equilibrium wage is above the actual wage:  ______ A) the wage rate will fall. B) the demand for labor will increase. C) the wage rate will rise. D) the demand for labor will decrease.

2) You are running a small yard maintenance business for the summer. What do you expect to happen to the number of yards you can maintain in a day as you add workers if you don't purchase more capital equipment (like mowers and leaf blowers)? _____________

3) Gloria works for a museum in a large city with many other museums. Her boss proposes that the museum should raise the price of admission to increase revenues. Gloria was a good student in her economics principles course. How should she advise her boss?  _____________

4) "If the amount of product differentiation in a monopolistically competitive industry is very small, the outcome in that market will not be very different than if it were a perfectly competitive industry." Explain. _____________

5) Walking up an escalator as opposed to standing still on an escalator makes sense if the ________ of walking is less than the ________ of walking. 5) _______
A) marginal cost; marginal benefit B) marginal cost; opportunity cost C) marginal benefit; marginal cost D) marginal benefit; opportunity cost

6) Suppose that your tuition to attend college is $14,000 per year and you spend $5,000 per year on room and board. If you were working full time, you could earn $26,000 per year. What is your opportunity cost of attending college? 6) _______
A) $19,000 B) $31,000 C) $40,000 D) $45,000
Recall the Application about the impact inflation has on your potential future salary and the repayment of student loans to answer the following question(s).

7) According to this Application, if you earn a salary of $80,000 in the first year and all prices decrease by half in the next 5 years, what will your nominal annual salary be in 5 years? 7) _______
A) $8,000 B) $10,000 C) $20,000 D) $40,000

8) You borrow money to buy a house in 2007 at a fixed interest rate of 6.5 percent. By 2010, the inflation rate has steadily fallen to 2.5 percent from the recent high of 4.0 percent in 2007. Considering only your mortgage, is inflation good news or bad news for you? 8) _______
A) bad news, because inflation hurts everyone B) good news, because it makes the real value of your mortgage payments decrease C) bad news, because it makes the nominal value of your mortgage payments increase D) bad news, because it makes the real value of your mortgage payments increase
Bath Groom 0 6 7 5 13 4 18 3 22 2 25 1 27 0
Table 2.1

9) Kaitlyn and Larissa have formed a dog bathing and grooming business. The number of dogs they can bathe or groom in any given day is depicted in Table 2.1. As they groom more dogs, the opportunity cost of grooming additional dogs 9) _______
A) rises. B) falls. C) remains constant. D) depends on the prices being charged.
Hair Pins /hour Bandanas /hour Nigel 4 10 Mia 9 3
Table 3.3

10) Consider two individuals, Nigel and Mia, who produce hair pins and bandanas. Nigel's and Mia's hourly productivity are shown in Table 3.3. Which of the following is true? 10) ______
A) Nigel has an absolute advantage in producing bandanas but not hair pins. B) Nigel has an absolute advantage in producing hair pins but not bandanas. C) Nigel has an absolute advantage in producing both goods. D) Nigel does not have an absolute advantage in producing either good.

11) The phenomenon which occurs when markets do not produce the most efficient outcome on their own is known as 11) ______
A) economic certainty. B) imperfect information. C) market failure. D) public goods.
Kites /hour
Snowboards /hour Jesse 8 1 April 12 3
Table 3.2

12) Consider two individuals, Jesse and April, who hand paint kites and snowboards. Table 3.2 shows how much of each good Jesse and April can paint in one hour. Which of the following is true? 12) ______
A) Jesse has an absolute advantage in painting snowboards but not kites. B) Jesse has an absolute advantage in painting kites but not snowboards. C) Jesse has an absolute advantage in painting both goods. D) Jesse has an absolute advantage in painting neither good.

13) Consider two individuals, Jesse and April, who hand paint kites and snowboards. Table 3.2 shows how much of each good Jesse and April can paint in one hour. Which of the following is true? 13) ______
A) April has neither an absolute nor comparative advantage in painting kites. B) April has both an absolute and comparative advantage in painting snowboards. C) April has both an absolute and comparative advantage in painting kites. D) April has neither an absolute nor a comparative advantage in painting snowboards.

15) If the demand for one good decreases when the price of another good increases, the two goods are ________ goods. 15) ______
A) complementary B) normal C) inferior D) substitute

16) Suppose that in October the price of a cup of cafe latte was $2.50 and 400 lattes were consumed. In November the price of a latte was $2.00 and 600 lattes were consumed. What might have caused this change? 16) ______
A) The price of coffee beans (an input of production of cafe lattes) fell. B) The price of tea (a substitute for cafe lattes) rose. C) The price of tea (a substitute for cafe lattes) fell. D) The price of coffee beans (an input of production of cafe lattes) rose.

18) If the price elasticity of supply is inelastic, which of the following could be a possible value of the elasticity? 18) ______
A) 3 B) 1 C) 0.3 D) -0.3

19) Suppose that the elasticity of demand for newspapers is 2.0 and quantity demanded decreases by 40%. What must the percentage increase in price have been? 19) ______
A) 2% B) 20% C) 80% D) 200%

20) If the number of highway deaths among young people is roughly proportional to their beer consumption and young peoples' elasticity of demand for beer is 1.5, then to decrease highway deaths of young people by 15 percent, taxes would need to be increased enough to increase the price of beer by: 20) ______
A) 1%. B) 1.5%. C) 10%. D) 15%.

21) Figure 6.9 depicts a hypothetical fish market with a horizontal supply curve. Suppose the government imposes a tax of $2 per pound of fish, and the tax is paid in legal terms by producers. If the supply curve were positively sloped: 21) ______
A) consumers would bear the full cost of the tax. B) both producers and consumers share the tax. C) producers would bear the full cost of the tax. D) There is not sufficient information.

22) If the government imposes a maximum price in a market that is below the equilibrium price: _____ A) total surplus in the market decreases. B) total surplus in the market does not change. C) total surplus in the market increases. D) total surplus may increase or decrease, depending on whether costs are increasing or decreasing in production.

23) If demand is elastic, and the government decides to raise the tax on new cars. Then the price for cars will increase by a ________ amount and car buyers will bear a ________ share of the tax. 23) ______
A) large; small B) small; large C) large; large D) small; small

24) Which of the following statements about consumer choice theory is TRUE? 24) ______ A) It helps us understand changes in consumption patterns. B) It provides insights into how consumers make decisions. C) Given the limitations dictated by people's incomes and prices, it helps the consumer choose a commodity bundle of the highest level of utility. D) All of the above are true about consumer choice theory.

25) Refer to Figure 7.7. Which of the following is true? 25) ______ A) A is preferred to C. B) C is preferred to A. C) B is preferred to D. D) D is preferred to B.

26) When at least one factor of production is fixed, firms require more and more workers to produce each additional unit
of output. This describes: 26) ______
A) learning by doing. B) diminishing marginal returns. C) increasing marginal returns. D) short-run adjustments.
Recall the Application about the reduction in costs of generating solar power to answer the following question(s).

27) Recall the Application. A tax levied on coal-fired plants that is based on the amount of carbon released in the atmosphere is considered by the firm as a: 27) ______
A) sunk cost. B) variable cost. C) source of revenue D) fixed cost.

28) Figure 8.2 presents a firm's marginal, average total, average fixed, and average variable cost curves. The firm minimizes average variable costs by producing ________ units. 28) ______
A) 50 B) 100 C) 150 D) 200

29) Figure 9.2 shows the cost structure of a firm in a perfectly competitive market. If the market price is $10 and the firm chooses the profit maximizing output level, its profit is: 29) ______
A) $1,000. B) $800. C) $720. D) $200.

30) Price discrimination is related to elasticity because: 30) ______ A) the firm can increase revenues by charging all customers higher prices. B) the firm can increase revenues by charging customers with elastic demands higher prices and charging customers with inelastic demands lower prices. C) the firm can increase revenues by charging customers with elastic demands lower prices and charging customers with inelastic demands higher prices. D) None of the above; elasticity and price discrimination are unrelated.

32) Studies of real world markets suggest that prices and the number of firms of comparable size in a market are: 32) ______
A) negatively or inversely related. B) positively related. C) not related. D) sometimes negatively or inversely related, but usually positively related.

33) Under the conditions of monopolistic competition, if a firm is earning economic profits in the short run: 33) ______
A) long-run economic profits are positive. B) firm profits are higher in the long run than in the short run. C) prices are higher in the long run than in the short run. D) average costs of production are higher in the long run than in the short run.

34) The key feature of ________ is that firms act strategically. 34) ______ A) perfectly competition B) a natural monopoly C) a monopoly D) an oligopoly

36) Suppose that there are five firms in a market, each controlling 20% of the market. The HHI would equal 36) ______
A) 10. B) 100. C) 1,000. D) 2,000.

38) Under a policy of average-cost pricing, a monopolist must charge the price at which its ________ cost curve intersects its ________ curve. 38) ______
A) marginal; demand B) average variable; demand C) average; demand D) marginal; marginal revenue
Recall the Application about how physical attractiveness affects wages to answer the following question(s).

39) Recall the Application. Relative to people of average appearance workers receive ________ wages if they are ________. 39) ______
A) the same; either attractive or unattractive B) higher; unattractive C) lower; more attractive than average D) higher; more attractive than average